Firms’ Strategic Management Disclosure Policy Before Debt Offerings

Abstract

This study examines firms’ strategic management disclosure policy before debt offerings. We extend prior studies by performing multiple regression analyses for both the level of and the change in management disclosure prior to debt offerings using a much more comprehensive set of sample firms. We find that debt issuing firms issue more management disclosures or increase them prior to debt offerings than do non-debt issuing firms, and that these management disclosures tend to be conservative rather than optimistic. We also provide some evidence that public debt issuing firms use more management disclosures than private debt issuers. Additional tests using alternative measures of management forecasts and methodologies similar to prior studies confirm our results. These results add convincing evidence to the literature in this area, where there is a lack of strong evidence.